Case Law Details
J. K. Fenner (India) Limited Vs JCIT (ITAT Chennai)
It is also settled law that disallowance made u/s 14A could not exceed the exempt income earned by the assessee. Further, disallowance u/r 8D(2)(iii) was to be computed only by considering those investments which have yielded exempt income during the year. These propositions are duly supported by the decision of Hon’ble Madras High Court in the case of Redington India Private Ltd. (392 ITR 633) as well as another decision of Hon’ble Court in CIT V/s Chettinad Logistics Private Ltd. (95 com 250).
The assessee’s plea that the investments were strategic investment and therefore, no disallowance was to be computed, is to be disregarded in the light of decision of Hon’ble Supreme Court in the case of Maxopp Investment Limited V/s CIT (91 com 154).
Therefore, on the given facts and circumstances of the case, we direct Ld. AO to record an objective satisfaction as to why the disallowance made by the assessee was not sufficient or acceptable. If Ld. AO is satisfied, then he could proceed to apply Rule 8D and compute the disallowance subject to our observation made in preceding paras. Needless to add that adequate opportunity of hearing shall be granted to the assessee.
We would also hold that the adjustment of disallowance u/s 14A could not be made while computing Book Profits u/s 115JB as per the decision of Special Bench of Delhi Tribunal in ACIT V/s Vireet Investment (P) Ltd. (165 ITD 27) as well as the recent decision of Hon’ble Karnataka High Court in Sobha Developers Ltd. V/s DCIT (2021; 125 com 72). We order so.
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